A good real estate agent does much more than sell houses- the top factor in choosing a real estate agent is TRUST. That is because clients look to their agents for all kinds of advice- there are the obvious subjects, such as valuation of real estate, loan products, school districts. In my career as a Real Estate Broker, clients have asked me for countless referrals- everything from the real estate related, such as home inspectors and lenders, to the very random, such as dentist, housekeeper, or dog groomer.
Experienced real estate agents are an invaluable resource for local information, usually living in or knowing well the areas in which they work, and having a Rolodex full of vendors used by themselves and their clients over the years. I strive to provide premium service to my clients, going above and beyond to make things easy for them- and I also truly enjoy helping people, whether or not they are clients- and am eager to assist anyone who asks. Additionally, I love to support businesses who I have good experience with, and especially to promote local and/or small businesses that I respect.
So, what’s the problem, you ask…. Well, California has recognized a cause of action for “negligent referral”. Because a real estate broker has a special duty of care to their clients, a consumer may place more reliance on their recommendations than one from another person who does not have that higher duty of care. My experience as an attorney makes me more alert to this hazard than most agents are and should be. I hope that agents who read this will be reminded to be cautious in making referrals and that buyers and sellers are reminded to conduct their own inquiries to ensure that any referred individual or company is appropriate for the task.
I have personally seen clients taken to court for what they believed was merely trying to be helpful. Referring an unlicensed contractor, or even a licensed contractor who is alleged to be negligent can be a litigation nightmare for a broker who must defend that they conducted an appropriate investigation of the contractor prior to referring. One area that deserves special discussion is a supervising broker’s responsibilities for each of their agents. A supervising broker must ensure that not only their own, but that each of their agents’ referrals are appropriate. If they are not, the supervising broker may be liable for any referral made by an agent.
What can you do to protect yourselves? We would all feel like jerks if we just said: “I don’t know, try Google,” when our client asks for who to call for their termite inspection. However, there are ways to mitigate liability while providing those referrals. Put them in writing with a good disclaimer that you are not making any recommendations, but providing a list of options for the client’s convenience. Provide a list of options, and ideally, additional sources for the client to look on their own, rather than a single referral. Disclaimer or not, do some investigation prior to putting anyone on that list- if it is a licensed activity, confirm the license; look for disciplinary actions, check the BBB, look for complaints; look for certifications and/or training that give them credibility in their field; personal experience and testimonials from previous clients are also factors that would contribute to the reasonableness of your making the referral. (As I can’t un-know what I do as a lawyer, my list is dated within the disclaimer- “Information herein accurate as of 8/27/17”- just in case the person were to lose their license on 8/29/17 and without your being aware, you referred them on 9/1/17).
So, agents- don’t give a referral unless you can make a good faith recommendation. Clients- remember, real estate agents are human, in most cases, they are trying to help. Don’t take any referrals on faith alone, take them as a “lead” rather than an absolute endorsement. Do your own homework- check licenses, experience, do your research, and ALWAYS come to your own conclusions.
ABOUT LISA PHILLIPS, ESQ / CA Bureau of Real Estate Lic# 011894
Lisa Phillips is an active Realtor in the Los Angeles area, with more than twenty years as a practicing real estate broker and attorney. Her unparalleled knowledge of real estate, from local markets and pricing to legal issues and deal-making, has made her a trusted and valuable asset to her clients. In addition to her real estate and business savvy, Lisa is passionate about helping others, and works tirelessly to achieve the best results for her clients. For more information, please visit www.LisaPhillipsRealEstate.com.
